PEST Analysis

Learning Target

I will be able to conduct a PEST analysis to analyze the political,

economic, sociocultural, and technological factors affecting a
business.
 Do Now
Imagine that you are the CEO of a smartphone company. What
external factors might impact your company’s success or challenges
in the market?
External Environment: all external forces affecting a business over
which it has not direct control

The key components of the external environment include:

1. The Political Environment
2. The Economic Environment
3. The Sociocultural Environment
4. The Technological Environment
 PEST Analysis
In order to analyze the factors that influence their external business
environment, businesses use a tool called a PEST analysis

PEST Analysis: a strategic tool used by businesses to discover,

evaluate, and track outside factors that can impact their business now
and in the future

P E S T
A PEST analysis focuses on the four main components of the
external environment of a business:

Political Economic
PEST
Analysi
s
Sociocultura Technologic
l al
 Conducting a PEST analysis is important in the strategic planning
and decision making for a business

A PEST analysis provides a comprehensive framework for

identifying potential challenges and opportunities that the businesses
may encounter
P Political

This section includes political factors that would affect a business,

such as government regulations, trade policies, and political stability

For example, trade tariffs would affect international sales of

smartphones for a technology company like Apple

Questions to ask for this category include:

• Have there been any recent changes in governing bodies?
• Is there any new legislation that can affect the business?
• Is there any political unrest in a country that it operates in?
 Politica
Quick Write! l

What political factors affect Tesla’s external environment?

• Government policies and regulations supporting the

adoption of electric vehicles

• Trade relations with countries producing electric batteries

E Economic
This section includes economic factors that would affect a business,
such as inflation, exchange rates, economic growth, and
unemployment

For example, an economic downturn would negatively affect

consumer spending on luxury goods for brands such as Rolex

Questions to ask for this category include:

• What do people in each geographic location the business operates in
prioritize spending money on?
• What is the current state of the economy in the areas it operates?
 Economi
Quick Write! c

What economic factors affect Tesla’s external environment?

• Impact of the economic downturn on consumer demand for

luxury electric cars

• Fluctuations in raw material prices for battery production

S Sociocultural

This section includes sociocultural factors that would affect a business,

such as demographic shifts, cultural norms, lifestyle changes, and social
attitudes

For example, the rising environmental consciousness is causing an

increasing demand for eco-friendly products

Questions to ask for this category include:

• What are the traditions and cultural norms of the people served?
• What popular cultural events have taken place in the areas served?
• What are the education levels of potential customers?
 Sociocultur
Quick Write! al

What sociocultural factors affect Tesla’s external

environment?

• Increasing interest in sustainability and green initiatives

causes an increase in demand for vehicles

• Preference for environmentally-friendly transportation

options
T Technological
This section includes technological factors that would affect a business,
such as advancements in technology, disruptive innovations, and digital
transformation

For example, the rise of e-commerce has impacted traditional retail

stores

Questions to ask for this category include:

• How has technology changed in the last year?
• How is technology changing the way people interact?
• How is technology changing the way people shop for products?
 Technologica
Quick Write! l

What technological factors affect Tesla’s external

environment?

• Advancements in battery technology and autonomous

driving

• Potential partnerships with tech companies for self-driving

technology
 PEST Analysis: Amazon
Political Economic Sociocultural Technological

- Government - Impact of - Consumer - Investment in

policies related changes in preferences for drone delivery
to e-commerce interest rates on fast and technology
taxation, consumer convenient - Development of
antitrust spending, delivery AI-powered
regulations, and economic - The rise of recommendation
labor laws recession online shopping systems for
affecting online due to the personalized
shopping habits COVID-19 shopping
pandemic experiences
 PEST Analysis: Apple
Political Economic Sociocultural Technological

- Import - Market - iPhone - Increasing

restrictions and recession addiction competition from
tariffs - Inflation - Education and companies like
- Tax regulations - Increasing business sectors Samsung,
- Vulnerable to labor costs using Apple Google, and
political unrest - High devices Motorola for
in China unemployment - Age range of smartphones
rate users expanding
into kids and
older adults
 Team Activity: Conducting a PEST Analysis
Directions: With your group, complete a PEST analysis for your
assigned company. Use the Internet to research relevant information for
the four main factors that affect your company’s business environment.

Team 1: Ford Motor Co.

P Team 2: McDonald’s T
Team 3: Netflix
Team 4: Starbucks
E Team 5: TikTok
Team 6: Uber
S
 Activity: Individual PEST Analysis
Directions: Now that you had some practice, complete your own PEST
analysis for a brand or company of your choice!
 Summary

Explain the importance of conducting a PEST analysis for a

business.